The primary data sources for this report are the Current Population Survey (CPS), the Survey of Income and Program Participation (SIPP), the Panel Study of Income Dynamics (PSID), and administrative data for the AFDC/TANF, Food Stamp, and SSI programs. Beginning with the 2001 report, there was a shift to using CPS rather than SIPP data for several indicators and predictors of welfare recipiency and dependence. This change was necessary because CPS data are updated annually, while SIPP updates are available much less frequently.

If it were not for the lags in data availability, the SIPP would be considered the most useful national survey for measuring welfare dependency. It was used most extensively in the first three annual dependence reports. Its longitudinal design, system of monthly accounting, and detail concerning employment, income and participation in federal income-support and related programs, make the SIPP particularly effective for capturing the complexities of program dynamics. It continues to be an important source of data in this report, particularly for measures related to AFDC/TANF spell duration and transitions in and out of AFDC/TANF recipiency, dependency, and poverty.

If it were not for the lags in data availability, the SIPP would be considered the most useful national survey for measuring welfare dependency. It was used most extensively in the first three annual dependence reports. Its longitudinal design, system of monthly accounting, and detail concerning employment, income and participation in federal income-support and related programs, make the SIPP particularly effective for capturing the complexities of program dynamics. It continues to be an important source of data in this report, particularly for measures related to AFDC/TANF spell duration and transitions in and out of AFDC/TANF recipiency, dependency, and poverty.

This year we have updated a past indicator based on the SIPP that takes advantage of many of these strengths. Indicator 10, Events Associated with the Beginning and Ending of Program Spells, identifies potential trigger events that are associated with welfare spell entries and exits among single mothers. While in volumes prior to 2004 we used the Panel Study of Income Dynamics (PSID) for this measure, monthly data from the SIPP (compared to annual data from the PSID) allow for greater specificity in identifying welfare spells and associations between welfare spells and a wide range of transition events. Because of the different accounting periods as well as other methodological differences in the two data sources, estimates from Indicator 10 in the current volume are not comparable to estimates found in previous reports.

For measures of receipt, dependency, and poverty at a single point in time, the report primarily uses the Annual Social and Economic Supplement to the CPS, which measures income and poverty over an annual accounting period. As stated above, the CPS data are available on a timelier basis than the SIPP, and have been widely used to measure trends since the welfare reform legislation of 1996. However, because the CPS does not collect income in the same detail as the SIPP, it has been subject to criticism for underreporting of income, particularly welfare income. To address this concern, some of the indicators in this report are based on CPS data that have been analyzed by the Transfer Income Model (TRIM3), a microsimulation model developed by the Urban Institute under contract to the Office of the Assistant Secretary for Planning and Evaluation. Although its primary purpose is to simulate program eligibility and the impact of policy proposals, the TRIM model has also been used to correct for underreporting of welfare receipt and benefits. Welfare caseloads in TRIM3 are based on CPS data, adjusted upward to ensure that total estimates of recipients equal the total counts from administrative data.

As shown in Figure SUM 3, the overall measures of dependency and recipiency have not been greatly affected by the change in data sources. Both data sources show a decline in dependence between 1996 and 1999 and a small increase in dependence between 2001 and 2002. Still, readers are cautioned against comparing measures for 1987-1995 from the SIPP data in the first three annual reports with the measures for 1996-2001 from the TRIM-adjusted CPS data.

Note: Recipiency is defined as receipt of any amount of AFDC/TANF, SSI, or food stamps during year. Dependency is defined as having more than 50 percent of annual family income from AFDC/TANF, SSI and/or food stamps. Dependency rates would be lower if adjusted to exclude welfare assistance associated with working.

Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1994-2003, analyzed using the TRIM3 microsimulation model, and unpublished tabulations from the Survey of Income and Program Participation, 1987, 1990, 1992, 1993, 1996 and 2001 panels.

The Panel Study of Income Dynamics (PSID) is another source of data used in this report. Like the SIPP it provides longitudinal data, but over a much longer time period than the three- to four-year time period of the SIPP. With annual data on program receipt since 1968, the PSID provides vital data for measuring longer-term welfare use over periods of up to 10 years. Because the PSID indicators cover time spans as long as a decade, they are updated less frequently than the CPS-based and SIPP-based measures. Reductions in the frequency and detail of data collection under the PSID have made it difficult to update the reasons for entrance and exit from welfare receipt (Indicator 11 in the 2003 report). Therefore, as discussed above, a new measure of reasons for entrance and exit from AFDC/TANF based on the SIPP is included in this report.

Finally, the report also draws upon administrative data for the AFDC/TANF, Food Stamp and SSI programs. These data are largely reported in Appendix A. Like the CPS data, administrative data are generally available with little time lags; these data are generally available through fiscal year 2003. To the extent possible, TANF administrative data are reported in a consistent manner with data from the earlier AFDC program, as noted in the footnotes to the tables in Appendix A. The fact remains that assistance under locally designed TANF programs encompasses a diverse set of cash and non-cash benefits designed to support families in making a transition to work, and so direct comparisons between AFDC receipt and TANF receipt must be made with caution. This issue also affects reported data on TANF receipt in national data sets such as the CPS and SIPP.

For further technical information about the data presented in the report, specifically for information on race and ethnicity, unit of analysis, and annual versus monthly measures, please see Appendix D.

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